Many investors focus on buying real estate outside the traditional retail routes. While in many cases, this is a successful and necessary avenue for seasoned investors who are experts in their chosen markets, what about when an investor decides to expand into a new market?
Choosing a new market requires a lot of time and research. And at the end of the day, no amount of research and analysis can replace the knowledge of a great local investor agent.
Local agents are great resources and will have insights to help investors identify the areas of town that have the best locations and fetch the highest rents. They will also be aware of upcoming developments that will allow investors to get into great areas before they become investment hot spots.
Why You Need a Rock Star
What if an investor isn’t sure which market will be their next market? What if they need to explore several to narrow it down? Is it best to work with multiple agents in each market, or just one?
When getting into a new market, investors need a rock star agent in order to learn the market. Furthermore, they only need ONE rock star agent.
The thing about top-performing agents is they know other top-performing agents. These relationships are the single most powerful tool for any investor when it comes to finding great deals.
A rock star agent will have closed many investor transactions and have good relationships with all of the other agents, wholesalers, and developers in the area. These relationships allow said agents access to the most properties and the best deals before they become public.
Acquiring the Talent
So, how do you, as an investor, identify a rock star agent in a new market and establish a working relationship in order to leverage their connections to build a successful portfolio?
Ask the Right Questions
First, you need to make sure that you’ve found a rock star. How do you identify these top-performers? By asking questions, of course! Here are a few good ones:
- “How many transactions have you done in the past year?” The more deals an agent has closed, the more relationships they will have and the more value they bring to the table.
- “How many of those transactions were investment clients?” If they sold 27 primary homes and two investments, they probably aren’t the right agent.
- “Do you own any investment properties yourself?” While it’s not necessary for a rock star to own investment properties if they have a lot of investor client experience, it certainly makes a difference. Investors understand what other investors are looking for, how they think, and what makes sense in a property. They’ve been in your shoes as a buyer, and that experience can’t be taught.
Second, you’ll need to be 100% honest and transparent with your agent. Let them know that you aren’t entirely sure that this is the market for you yet, and ask them to give you their honest perspective on the market as a whole, the best areas, the returns, and where they think the market is headed.
Make sure you paint a clear picture of where you are in your decision-making process, but also let them know that you would not be speaking with them if you weren’t serious about narrowing down to one market and beginning to build a portfolio there.
When an investor says, “I’m looking in 27 markets across the country for the best deal,” it tells agents that the investor isn’t serious, isn’t focused, and is likely a waste of their time.
However, when an investor says, “I have done a lot of research, and I’ve narrowed it down to three markets. I have this list of questions about yours. Can you clarify a few things for me?” it tells the agent that you’ve spent a lot of time researching and narrowing down. It shows a much greater level of seriousness, and a rock star is more likely to take you on as a client.
Lastly, be humble. You might be a big fish in Little Rock, Arkansas, but you’re a newbie in Greenville, South Carolina, and that’s okay. Every market is different, and a good agent can explain what does and does not work in their market. Kicking in the door and proclaiming that you’re using 15 agents and whoever brings you the best deal will be the one you choose is a great way to get ignored by all but the newbie agents with no experience and no relationships.
Working with many agents is actually counterproductive for the investor, as most of the deals are going to be with the top one or two agents. The top one or two agents are going to have a list of clients that they are going to call well before they call a client who they know is working with 10 agents.
Another great way to get ignored is by asking an agent for a piece of their commission right out of the gate. While there is a time and place for a commission discount, the first deal is not it. If you haven’t even built a relationship and you’re already telling them that you don’t value their service, why would they bring you the good deals?
Good deals go to good clients. Don’t let your ego ruin your shot at the good deals and cause you to potentially miss the boat on a great market.
In a nutshell, the best way to begin a portfolio in a new market is to narrow down your search to just two or three markets, locate the top-performing, rock star agent in each market, be honest and transparent about your research and intentions, and be humble. Every new market is a learning experience and a potential avenue for significant wealth-building.
Be a sponge and learn everything you can from those who are local experts. The more you absorb, the sooner you’ll be an expert yourself, and you’ll be ready to repeat the system and scale!
How have you found success with agents in a new market?
Share your tips in the comments below.